Correlation Between Barratt Developments and Boohoo PLC

Can any of the company-specific risk be diversified away by investing in both Barratt Developments and Boohoo PLC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Barratt Developments and Boohoo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barratt Developments PLC and BoohooCom PLC ADR, you can compare the effects of market volatilities on Barratt Developments and Boohoo PLC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Barratt Developments with a short position of Boohoo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barratt Developments and Boohoo PLC.

Diversification Opportunities for Barratt Developments and Boohoo PLC

-0.82

Correlation Coefficient

Barratt Developments  Boohoo PLC

Pay attention - limited upside

The 3 months correlation between Barratt and Boohoo is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Barratt Developments PLC and BoohooCom PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BoohooCom PLC ADR and Barratt Developments is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Barratt Developments PLC are associated (or correlated) with Boohoo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BoohooCom PLC ADR has no effect on the direction of Barratt Developments i.e., Barratt Developments and Boohoo PLC go up and down completely randomly.

Pair Corralation between Barratt Developments and Boohoo PLC

Assuming the 90 days horizon Barratt Developments PLC is expected to under-perform the Boohoo PLC. In addition to that, Barratt Developments is 1.02 times more volatile than BoohooCom PLC ADR. It trades about -0.04 of its total potential returns per unit of risk. BoohooCom PLC ADR is currently generating about -0.03 per unit of volatility. If you would invest  891.00  in BoohooCom PLC ADR on September 5, 2024 and sell it today you would lose (70.00) from holding BoohooCom PLC ADR or give up 7.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Barratt Developments PLC  vs.  BoohooCom PLC ADR

Barratt Developments PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barratt Developments PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BoohooCom PLC ADR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BoohooCom PLC ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Boohoo PLC showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barratt Developments and Boohoo PLC

The main advantage of trading using opposite Barratt Developments and Boohoo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barratt Developments position performs unexpectedly, Boohoo PLC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Boohoo PLC will offset losses from the drop in Boohoo PLC's long position.

The idea behind Barratt Developments PLC and BoohooCom PLC ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.